Trading on the Nigerian Stock Exchange in the past week was mixed, closing lower as investors, analysts and traders adopted a wait-and-see approach to the expected Q1 numbers that had started to roll in with mixed performance, as they take their time to digest the reports, while expecting others.
While we the wait-and-see attitude continues, we note here that some of the earnings reports beat market expectations, while others came flat and even below forecast which made the week’s trading highly volatile. Besides the high number of companies whose share prices were adjusted for dividend payment within the period, contributing to the market closing lower despite the high volume traded and buying pressure during the week.
The relatively stable exchange rate of the Naira against other currencies of the world, helped by the continued intervention of the Central Bank of Nigeria (CBN) in the FX market will continue to impact positively on productivity and attract inflow of investments. Add this to the impact of the rising oil prices and production volumes, which have led to improvements in fiscal revenue and foreign exchange liquidity.
At the same time, the International Monetary Fund (IMF) expects growth to expand to 2.1% from 0.8% and Investdata Consulting believes that with oil price hitting three-year high at $73.82, it will sustain the current recovery and remain a major driver of the expected growth in 2018.
Oil sector low-base-push will likely last till Q42018, particularly given that oil production disappointed in Q42017 and new barrels are expected from Total’s Egina field by Q42018. Whilst structural constraints to non-oil sector growth –recurring energy scarcity, weak infrastructure and port congestion remain headwinds. We note that the cyclical challenges will start to abate from 2018 against the backdrop of anticipated expansion in fiscal spending as fiscal balance stabilizes and political parties spend ahead of the election. Further deceleration of the nation’s inflation rate will directly affect GDP price deflator and support real growth and increase in private investments due to favourable aggregate demand outlook.
Meanwhile, last week the composite NSE All-Share Index shed 113.81 points to close the period at 40,814.89 from an opening figure of 40,928.70 points, representing a 0.28% decline on a high volume of trade, compared to the previous week’s level. The volume index of total transactions for the week was 1.23, buying pressure of 67%, while selling volume was 33% to reverse the previous week’s marginal gain. In the same vain, market capitalisation for the period lost N41bn to close lower at N14.74tr from N14.78tr, representing a 0.28% loss of value.
The week’s advancers’ table was dominated by low and medium cap stocks as investors focus on value and growth stocks in expectation of their Q1 scorecards as economic fundamentals become even stronger. The losses suffered by Dangote Cement, Nigerian Breweries, Double One and others during the period further reduced the NSEASI’s year to date return to 6.72%, just as the gain in market captalistion dropped at N1.12tr, representing 8.16% growth from the year’s opening value.
Market breadth for the week was positive and strong as the number of advancers outpaced decliners in the ratio of 36:33 on high volume of trades that were mixed, owing to improving demand for stocks. This is coming at a time when many companies are yet to release their Q1 results, thereby becoming a source of concern for the investing public who suspect that numbers may eventually be mixed or better than expected to reflect the improving economic indices.
It is worrisome that many banks are yet to make their first quarter earnings reports available to the market, considering that some are yet to release 2017 full year results six trading days to the end of the 30-day deadline granted under the same post-listing rule of the exchange.
The week opened with the composite NSE All-Share index (ASI) shedding 0.97% to halt the uptrend of the previous week, but reversed on Tuesday when it gained 0.78%, a situation that was short-lived at the midweek with the pullback of 0.04%. This could not be sustained on Thursday as it reversed up by 0.25% but shed 0.14% on the last trading of the week, bringing the week’s total loss to 0.28% as the market awaits more Q1 numbers.
The week’s sectorial indices were bearish and mixed, with the NSE Industrial, Insurance and Consumer Goods, closing in red, whereas the NSE Banking and Oil/Gas were in green, helped by gains in the share prices of UBA, Zenith Bank, Guaranty Trust Bank, Seplat and Oando to impact the sectors positively.
Market activities in volume and value were up by 111.97% and 54.28% as 3.01bn shares worth N30.3bn were exchange, from previous week’s 1.42bn units valued at N19.64bn.
Oando and Jaiz Bank were the best performing stocks for the week, topping the advancers’ table with 39.13% and 21.13% gains respectively to close at N9.60 and N0.86 each, on the back of market sentiments. On the flip side, the worst performing were AG Leventis and 11 Plc that lost 14.06% and 14% to close at N0.55 and N172.00 respectively, owing to profit taking.
During the week also, the share prices of Dangote Cement, Unilever, National Salt, Continental Reinsurance and Transcorp were adjusted for dividend recommended by their directors.
Stocks scheduled for markdown in the new week are: Law Union, Caverton, GSK, AXA Mansard Insurance, Dangote Flour, Lafage Africa, as well as May & Baker
Market Outlook
We expect an upturn in the market on the strength of low valuations, expected numbers to beat expectations as bargain hunters take advantages low prices, ahead of first quarter economic data and corporate earnings that had started trickle in to reveal the true state of the economy and the companies so far in 2018, helped also by the sustained rise in oil prices that hit its highest in three-year at $73.82 as at last Friday.
Meanwhile, dividend income players are take position ahead of more economic data, even amidst the expected sustained volatility and repositioning.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is approaching.
We advise investors to allow numbers guide their decisions while repositioning for the rest of the year’s trading activities, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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